In the State of the Union address, President Obama proposed raising the federal minimum wage to $9.00, an act that may have an effect on a certain group of people in the economy.
Rayanne Matlock, a freshman studying political science who works for minimum wage, likes the idea of getting more money but is concerned with how employers may cover the costs through raising prices on necessities. She also worries that it could cause more unemployment.
“I think it could potentially hurt the economy if not done at the right time,” Matlock said.
According to Michael Ransom, an economics professor at BYU, historically, a raise in minimum wage hasn’t had a major impact on the number of jobs and unemployment. He said the major impact the raise could have would depend on how employers deal with covering the extra cost.
“One thing an employer might do is raise the standard a little because they are paying higher wages,” Ransom said.
Ransom said one way employers could do this is by giving more duties to particular positions, requiring a potential employer to have more skills or more education. This could potentially make it difficult for people with lower levels of skill or education to find employment.
Kim Chamberlain, a junior studying sociology, made more than minimum wage working an early-morning custodial job. While she thinks that raising minimum wage would be nice, she is worried about how it will effect the price of living.
“I know it’s supposed to be a good thing, but my concern is that they’ll raise the price on everything else,” Chamberlain said.
According to Ransom, Chamberlain’s worry is valid. He said raising prices is a common way that employers can cover the cost of higher prices. Many companies also have their product made in countries where wages are lower to save money as well. Another solution to covering costs is also decreasing the amount of time an employee can work.
However, an increase in the federal minimum wage may not affect all states equally. According to the Department of Labor website, there are states that have a minimum wage that is over or close to $9.00. For example, Washington has a minimum wage of $9.19, so the change will have less of an effect there than it will in states like Georgia, which has a minimum wage of $5.15.
Despite these potential changes, Ransom doesn’t think it will have a major effect on the national unemployment rate, which is a potential of many Americans. He said employment has been steadily increasing for the past few years and will continue to grow even if minimum wage is increased. The growth rate may be reduced but will continue to improve.